Q: My son is on SSI for a mental illness. He is going to have settlement on a lawsuit soon. I understand that in order for him to protect his SSI this settlement must go into a first party trust. Is there any alternative and, if not, can you recommend how I go about setting this up? Thank you. --Lisa, Sacramento, CA
A: Setting up a first party special needs trust (SNT) is one way to protect a person's means-tested benefits, such as SSI and Medi-Cal, after they receive an inheritance or litigation award. Depending on the amount of your son's settlement, he may want to establish his own first party SNT (sometimes called a (d)(4)(A) SNT), or he could join a pooled SNT (sometimes called a (d)(4)(C) SNT). The start-up and administrative costs of the SNT depend on the type and the terms of the trust.
It is critical that you consult an estate planning attorney who has experience with special needs planning as soon as possible. This is a specialty area of estate planning and many estate planning attorneys, including myself, do not have the expertise to answer your questions. The rules in this area are complex, especially if your son is receiving both state and federal benefits. Even a minor misstep could affect your son's continued eligibility for benefits.
An experienced special needs planning attorney can help you work through the benefits and drawbacks of the different types of SNTs and determine the best approach for your son. You can search State Bar or county bar referral lists of estate planning attorneys and look specifically for those who do this type of work. Good luck.